Rakesh Gupta is Managing Partner of LoEstro Advisors which advises clients on strategy, fund-raising and M&A. An alumnus of IIT KGP and ISB, Hyderabad, Gupta was former head of finance and strategy, People Combine Educational Initiatives and management consultant with McKinsey & Co. What’s your outlook on India’s K-12 sector? India has the largest enrolments in K-12 schools globally with more than 276 million students attending classes from pre-primary to secondary. It is also one of the very few markets which have had a solid growth in enrolment numbers (2.4%) year on year. Today education takes the largest share of non-food expenditure in an urban Indian household. Increasingly, state and central governments, education boards have also started to take more a pragmatic approach towards regulations in the sector – paving way for more private capital to flow in. Historically very few PE Investments / M&A Activity have happened in the Indian K-12 Space, While globally it is one of the preferred sectors – why is that ? Despite very attractive macros, the number of scaled private K-12 businesses in India is dismally low. Out of the more than 1500 companies listed with the National Stock Exchange, less than ten are directly in the education space and even fewer in the K-12 space. This state of private K-12 businesses in India can be attributed to the absence of quality growth capital. We attribute this to the following three main reasons: K-12 investment is typically a long gestation investment. Schools take minimum 5-7 years to reach scale and to start generating returns. There is not much patient capital available in the market. Secondly, private growth capital requires clear and multiple exit possibilities. The primary and secondary market for K-12 business is not deep enough. Finally, the regulatory environment has been the biggest overhang on the sector. In the last few months, we have seen a few large size cross-border M&A transactions in the K-12 space. LoEstro Advisors was involved in a few of them. Can you share your views on how global investors are looking at the Indian K-12 Space ? Globally, there are at least a dozen K-12 chains which have rapidly grown over the last decade or so. Key amongst them would be Nord Anglia Education, Cognita, Inspired Education, GEMS and International School Partnerships apart from the education platforms of various large PE funds like KKR, Barings PE, CDC, etc. In the last few months, we have seen many of the largest K-12 investors making big bets in India – Nord Anglia Education, Morgan Stanley, KKR and Cognita. Each of them have big plans for the Indian market and are looking to acquire quality schools. Given the sheer attractiveness of the market, other global operators will also look to actively participate. Do you also see private equity investors and domestic K-12 operators increasing their allocation for investment into the sector? Apart from a few investments, which PE funds made 5-7 years back, they have stayed away from the education sector…
